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Gdańsk Court of Appeal judgment dated 16 September 2020 Case No. V ACa 162/20

1. A petition to set aside an arbitration award is a legal remedy combining features of an extraordinary remedy at law, especially a petition for the revival of the proceedings, and an action for the formation of law or a legal relationship in which the claimant (petitioner) demands a state court to render a judgment on setting aside an existing legal relationship established by an arbitration award. A state court’s judgment granting the petition is of quashing nature, as in such a situation the state court can only set aside the arbitration award, and only insofar as demanded by the petitioner (…).

2. A petition to set aside an arbitration award is not intended to be a remedy leading to consideration, by a state court, of the merits of the dispute resolved by an arbitral tribunal. In fact, there is considerable autonomy in arbitration procedure (…) limiting the possibilities of review by the state court. If parties decide to submit a dispute to arbitration, they need to take these circumstances into account, including also little external control of arbitration awards. This does not mean, however, that if a dispute is submitted to arbitration, the parties have to agree to all kinds of procedural and substantive shortcomings of the arbitral tribunal (…).

3. Considering a petition, a state court examines a case only on the grounds set out in the Polish Civil Procedure Code. Art. 1206 of the PCPC exhaustively lists  the grounds on which a petition to set aside an arbitration award may be based. The difference between the grounds of a petition indicated in Art. 1206 § 1 and § 2 of the PCPC is that the grounds set out in § 1 are taken into account by a state court only at the request of a party, the grounds set out in § 2 are taken into account ex officio (…).

4. [I]t is deemed that the case in which an arbitral tribunal rules ultra petita or aliu should not escape the control of the state court. This assumption shall be considered well-founded also in the light of the Polish Civil Procedure Code, with the proviso that the character of arbitration may justify an approach to the assessment of the limits of the claim being more flexible than in the case of state courts.

5. [A]lthough Art. 1188 § 1 of the PCPC does not indicate obligatory elements of a statement of claim in arbitration proceedings, including the exact wording of the claim (cf. Art. 187 § 1 point 1 of the PCPC), nonetheless the necessity to concretize the claim as an element determining the subject matter of the arbitration proceedings may be derived indirectly from Art. 1202 first sentence of the PCPC; it may also result from the rules agreed by the parties or set out in the arbitration rules (…).

6. The principle of equal rights of the parties is a fundamental principle of arbitration proceedings indicated directly in Art. 1183 first sentence of the PCPC.

7. Procedural public policy may be a basis for assessment of an arbitration award in two aspects. First, subject to the assessment is the compliance of the procedure which led to issue of the arbitration award with the fundamental procedural principles of legal order. Second, subject to the assessment are the effects of the award from the point of view of their compliance with the procedural legal order, i.e. whether they are compatible with the procedural legal system, for example, whether they do not infringe res iudicata, the rights of third parties.

8. An arbitration award may be said to be contrary to the fundamental principles of the legal order only with respect to constitutional principles of the socio-economic system or the fundamental principles governing specific fields of substantive law (…).

9. [P]ublic policy within the meaning of Art. 1206 § 2 point 2 of the PCPC includes not only the principle of freedom of contract and the pacta sunt servanda principle, but also principles limiting the freedom of contract and stability of contracts.

10. [A]pplication by an arbitral tribunal of applicable substantive law for resolution of a dispute, which it is generally required to do under Art. 1194 § 1 of the PCPC, is thus subject to review by a state court considering a petition to set aside an arbitration award only insofar as application of such law is required by the public policy clause, which is considered by the court ex officio.

Publication date: 16-09-2020 | Case no.: V ACa 162/20

Key issues: petition to set aside arbitration award

id: 20583

Polish Supreme Court order dated 15 September 2020 Case No. I CSK 182/20

1. Generally, a state court cannot examine whether an award challenged in a petition to set aside was based on properly established facts and how and whether an arbitral tribunal correctly interpreted the norms of substantive law it applied (…).

2. By examination of the grounds and prerequisites set out in Art. 1206 § 1 point 4 of the Polish Civil Procedure Code, what is important is the presence of a failure to meet the requirements in the scope of fundamental principles of arbitration proceedings resulting from a statute or specified by the parties. One of these principles is to base the award on established facts, which takes place after hearing of evidence. (…). Thus, only if the state court found that such hearing of evidence has not been conducted at all, or has been incomplete or obviously faulty, in breach of the principles of logical reasoning, of linking facts together in a cause-and-effect chain, selective admission of evidence in the case, examination of evidence of only one party in groundless omission of the evidence requested by the other party, etc., it would be possible to find that the requirements set out in Art. 1206 § 1 point 4 of the PCPC. (…).

3. [A]n obvious discrepancy between an arbitration award and the facts of the case may demonstrate a violation of the rule of law (…). This means that not every declaration that an award is inconsistent with the factual state may result in setting aside of this award. It is assumed that a conclusion that the rule of law has been violated is justified, if as a result of the arbitration award the fundamental principles of the legal order of the state are infringed (…).

Publication date: 15-09-2020 | Case no.: I CSK 182/20

Key issues: arbitration award, petition to set aside arbitration award

id: 20579

Polish Supreme Court order dated 17 July 2020 Case No. V CSK 109/20

1. Going beyond the limits of the claim may … constitutes a violation of the fundamental principles of procedure before an arbitral tribunal (Art. 1206 § 1 point 4), alternatively, depending on the circumstances of a case, it may result in the defendant being deprived of the ability to defend its rights (Art. 1206 § 1 point 2 of the PCPC). There is also no doubt that a claim to set aside an arbitration award may relate to the entire award or to a part thereof only, and a state court is bound by the scope of the challenge indicated by the party, which does not mean that a state court cannot find a claim to be well-founded in part … .

2. On the other hand, the general view expressed by the adjudicating panel [in the Polish Supreme Court judgment dated 6 May 2016, Case No. I CSK 305/15 – insertion added] that a court is bound by the claim presented in the petition to set aside an arbitration award in full, and the court’s finding that the granting of a claim in part pertains to a claim of another kind that has not been raised by the petitioner, is isolated and has not been followed up in subsequent case-law, also after an amendment of the petition model procedure.

3. The proceedings to set aside an arbitration award are one-instance proceedings and a judgment may only quash or dismiss the petition, which, taking into account the principle of the state court being bound by the scope of the challenge, makes the application of Art. 384 of the PCPC in such proceedings, as a general rule, aimless.

Publication date: 17-07-2020 | Case no.: V CSK 109/20

Key issues: petition to set aside arbitration award

id: 20585

Warsaw Court of Appeal order dated 27 April 2020 Case No. VII AGz 35/20

1. There is no provision of law directly providing for expiration of an arbitration agreement if the financial situation of a party has been so deteriorated that they are not able to incur the costs of arbitration proceedings.

2. According to well-established views expressed in the doctrine, other reasons of expiration of an arbitration agreement include, as provided for in Art. 1168 § 2 of the PCPC, first of all, the following situations directly provided for in the Polish Civil Procedure Code: refusal to act as an arbitrator by the arbitrator indicated directly in an agreement, but the refusal to act as an arbitrator may also take place in the course of the proceedings on the part of persons who have performed the function of an arbitrator so far. As other reasons preventing an arbitrator to act as such, the following reasons, in particular, are indicated: death of an arbitrator, their long-term illness, deprivation of liberty (Art. 1168 § 1 of the PCPC), as well as refusal by a particular arbitration institution and the impossibility to perform an arbitration agreement (Art. 1168 § 2 of the PCPC) and, moreover, a situation when the unanimity or majority of voices required by the agreement cannot be obtained, if the case is heard by an arbitral tribunal in a composition of more than one arbitrator (Art. 1195 § 4 of the PCPC). Another instance of the inability of an arbitration tribunal to hear a case, which is not directly indicated in Art. 1168 § 2 of the PCPC, is for example, the situation of liquidation of the permanent court of arbitration indicated in the arbitration agreement… or if it is impossible to compose the arbitral tribunal in the proceedings in a manner that is required for the resolution of the case. Their common feature is that the obstacle to perform the arbitration agreement pertains to the arbitrator or the arbitral institution indicated by the parties, and not to an external reason, in particular, relating to one of the parties of the arbitration agreement. Moreover, these are all objective circumstances of a permanent nature. Such circumstances cannot include the deterioration of the claimant’s financial situation, for example due to the fact that it may change in the future.

3. Art. 1168 § 2 of the PCPC specifies the reason for an arbitration agreement to cease to be in effect as the circumstance that the hearing of the case by an arbitral tribunal from this Court of Arbitration emerged to be impossible for other reasons, which means that this regulation puts emphasis on the occurrence of a reason of this impossibility relating to the arbitral tribunal. What is more, although the Polish Civil Procedure Code does not stipulate expressly the reasons of expiration of the legal force of an arbitration agreement, they also include granting of a final ruling by a state court in the dispute which can be decided by the arbitral tribunal, and the lapse of the time limit with the reservation of which the arbitration agreement was concluded or fulfilment of a condition subsequent stipulated in the arbitration agreement.

4. Art. 1168 of the PCPC stipulates the situation when an arbitration agreement may cease to be in effect (unless the parties have stipulated other legal consequences of occurrences covered by this provision). The enumeration contained therein is therefore purely exemplary, in this sense that the parties may indicate other situations which will result in expiration of the arbitration agreement (the arbitration agreement ceasing to be in effect). Loss of the legal force by an arbitration agreement may also take place under other circumstances than those mentioned above, in particular in the event of conclusion of a written agreement terminating the arbitration agreement. There are also other reasons related to the content of the parties’ agreement and of the arbitration agreement related thereto…, for example non-fulfilment of a condition precedent or fulfilment of a condition subsequent (Art. 89-94 of the Polish Civil Code), as well as evasion of legal consequences due to an error, deception or threat (Art. 84-87) or other events specified by the parties as reasons for the arbitration agreement to cease to be in effect.

5. There is view presented in the doctrine that that the reasons for an arbitration agreement to cease to be in effect may sometimes include termination for an important reason or withdrawal from an arbitration agreement. It is, however, impossible to share this view, because it would be pointless to conclude an arbitration agreement, if each party were to be able to evade the consequences thereof by an unilateral legal act, so without the need to cooperate with or to obtain a consent of the second party.

6. The principles arising out of the Constitution of the Republic of Poland regarding the state judiciary, including Art. 45 of the Constitution, cannot be applied to arbitration which derives its competence to resolve a dispute from a free, independent decision made by the parties themselves as to the way of exercising of their private rights… .

7. [I]t follows from Art. 147a of the Bankruptcy Law that not a mere lack of funds, but making of a declaration of will on withdrawal from an arbitration agreement results in expiration thereof.

8. Unenforceability (the inability to perform) of an arbitration agreement refers to arbitration agreements which do not infringe any mandatory provision of law and are, in fact, valid, but they present virtually insurmountable difficulties in conducting arbitration proceedings on their basis. Expiration of an arbitration agreement means a definitive discontinuation of the effects made by the agreement due to the circumstances which occurred after the agreement was made.

9. An arbitration agreement is unenforceable, if it stipulates requirements towards persons who are to be arbitrators that in fact it is impossible for an arbitral tribunal to be constituted, since it is impossible to indicate any persons who meet such requirements. An arbitration agreement is also unenforceable, if commencement of arbitration proceedings is not possible at all for other reasons, with the exception of the reasons leading to the expiration of the arbitration agreement. An arbitration agreement shall be deemed unenforceable, if it indicates, as the place of arbitration, a state in which, for obvious reasons, it is impossible to conduct arbitration proceedings (for example, due to a war in that state). An arbitration agreement that has been formulated so vaguely that it is impossible to determine its content may also be deemed unenforceable. Another example of such a situation is when the parties have concluded an arbitration agreement indicating a permanent court of arbitration at an institution which has been liquidated or the parties have concluded an arbitration agreement indicating the jurisdiction of a permanent court of arbitration which is impossible to be identified by reasonable interpretation of that indication… .

10. [I]nterpretation of Art. 1165 § 2 of the PCPC, in the scope of a prerequisite of unenforceability of an arbitration agreement, should also take into account objective and permanent prerequisites of impossibility of initiating and conducting of proceedings before this court of arbitration. Such prerequisites also include, according to the Court of Appeal, the existence of objective and permanent reasons which realistically prevent a party from covering the costs of commencement and conducting of arbitration proceedings and such objective and permanent inability absolutely results out of the evidentiary material collected in the case… .

11. There are many arguments in favour of the substantive-law nature of the arbitration agreement. For example, the fact that an arbitration agreement remains binding also for the legal successors of the parties both in terms of general and specific succession, because it is the legal relation or the object of a dispute, and not the specific parties to the dispute that are submitted to arbitration, or the fact that there are no obstacles to apply substantive law provisions regarding the capacity for legal acts, nullity of legal acts and defects of declaration of will by the assessment of the effectiveness of the arbitration award. The fact that conclusion of an arbitration agreement does not interrupt the limitation period is also in favour of the substantive nature of the arbitration agreement. Also the character of the power of attorney necessary to effectively enter into an arbitration agreement on behalf of a principal unequivocally indicates the substantive-law character of the arbitration agreement.

12. The pleading of the existence of an arbitration agreement raised by the respondent, which is consistent with the provisions of law and the purpose of the institution of the pleading of the existence of an arbitration agreement, i.e. with having the case heard before the relevant adjudicative forum, as agreed by the parties, cannot be considered a procedural abuse within the meaning of Art. 3 of the PCPC.

13. Abuse of an individual right is not a procedural activity of raising a plea of an arbitration agreement.

Publication date: 27-04-2020 | Case no.: VII AGz 35/20

Key issues: arbitration agreement, costs of arbitration

id: 20592

Judgment of the Court of Justice of 2 April 2020, C-480/18, PrivatBank

[I]n accordance with the principle of the procedural autonomy of the Member States, the national legislature may give the competent authority, in the complaints and penalty procedures referred to in Articles 80 to 82 of Directive 2007/64, as amended by Directive 2009/111, the power to take into account the existence and contents of an arbitration ruling settling a dispute between a user and provider of payment services concerned by those procedures, provided that the probative value given to that ruling in those procedures is not liable to undermine the purpose or specific objectives of the procedures, the rights of defence of the persons concerned or the independent exercise of the powers and competencies conferred on that authority, which is a matter for the referring court to ascertain.

Publication date: 02-04-2020 | Case no.: C-480/18

Key issues: arbitration award

id: 20563

Warsaw Court of Appeal judgment dated 30 January 2020 Case No. VII AGa 1508/18

1. [T]he fundamental principles of the legal order are the constitutional principles and the principles of other fields of law including civil, family, labour and procedural law. However, it cannot be assumed that an arbitration award violates the rule of law only on the basis of the arbitration award not being complaint with, for example, certain provisions of substantive law… .

2. Depriving a party of the ability to defend its rights before an arbitral tribunal occurs, if the arbitral tribunal fails to notify the party of the date of the hearing after which the award is announced, if it does not hear out a party at all or fails to give a party the opportunity to submit statements with respect to the matter in dispute, if the principle of equal treatment of the parties or the right of the party to be heard and submit evidence is infringed, if a party is prevented from getting familiar with the opposing party’s position, evidence submitted by the opposing party, if a party is prevented from addressing them, if a party is prevented from presenting and proving their arguments… . A party is no deprived of its defences, if evidence offered by that party is not admitted or examined… .  

3. The petitioner had… at least 3 weeks to authorize a new attorney [in the arbitration proceedings in the case – insertion added]. The fact that it decided to do so only one day before the hearing… cannot be a basis for setting aside of the arbitration award.

4. [A]pplication of Art. 1193 of the PCPC cannot be limited to shortcomings which took place in the course of arbitration proceedings, it should also cover the activities taken at the stage of appointment of the arbitrator, including at the stage of the petition set out in Art. 1206 § 1 point 2 of the PCPC submitted due to violation of the principles of arbitrator appointment.

5. [I]f, during the examination of a case by an arbitral tribunal, a party represented by a professional attorney took part in the activities of the arbitral tribunal and did not demonstrate at that time any procedural violations which were indicated by this party in the petition to set aside the arbitration award as the grounds for setting aside of the arbitration award indicated in Art. 1206 § 1 point 4 of the PCPC, the recourse to a procedural defect identified in such a way cannot take effect… .

6. In connection with the above, in the assessment of the Court of Appeal hearing the case, there are no grounds to find that the disputed arbitration award… violates the fundamental principles of the legal order of the Republic of Poland. In particular, this cannot be demonstrated by the circumstance, relied upon by the petitioner, that the Court of Arbitration recognized the activities of advocate R. D. taken before initiation of the arbitration proceedings to be the activities of an attorney-in-fact, in the situation when in the files of the case there was no power of attorney for an attorney-in-fact, granted to advocate R. D. by the petitioner, which would specify the scope of authorization of the attorney.    

7. [P]roceedings initiated by a petition to set aside an arbitration award do not lead to a substantive re-examination of the dispute between the parties, but their purpose is to verify the petitioner’s pleadings presented in the petition as to existence of the grounds referred to in Art. 1206 § 1 of the PCPC, and to assess if any of the conditions referred to in Art. 1206 § 2 of the PCPC exist, regardless of whether the petitioner relied thereon… .

8. [I]t cannot be accepted that an arbitration award violates the public policy clause solely on the ground that the award is not consistent with certain provisions of substantive law… .

9. A party cannot effectively raise [in the proceedings initiated by a petition to set aside an arbitration award – insertion added] that the composition of the arbitral tribunal was incorrect when during the proceedings before such a tribunal the party did request that a particular arbitrator be excluded… .

Publication date: 30-01-2020 | Case no.: VII AGa 1508/18

Key issues: arbitration procedure, petition to set aside arbitration award

id: 20598

Warsaw Court of Appeal judgment dated 12 December 2019 Case No. VII AGa 1503/18

1. The essence of the petition to set aside an arbitration award is to create a review mechanism respecting, on the one hand, the separateness and autonomy of arbitration, and on the other hand, preventing non-state court rulings violating the rule of law from functioning in the legal circulation. Proceedings initiated by a petition to set aside an arbitration award do not result in reconsideration of the merits of the dispute between the parties, but are intended only at verification of the petitioner’s allegations as to the existence of the grounds raised in the petition, as provided for in Art. 1206 § 1 of the PCPC. The aim of the petition is to prevent an arbitration award that is non-compliant the elementary formal requirements of dispute resolution from remaining in the legal circulation… .

2. [The legal doctrine – insertion added] raises that the possibility of conducting arbitration proceedings [before the Internet Domains Arbitration Court at the Polish Chamber of Information Technology and Telecommunications – insertion added] is not excluded by the fact that after filing of the lawsuit, in order to avoid liability for infringements, the content of the website in the disputed domain has been changed in a way which does not allow to determine whether there is an infringement of a third party’s rights at the time.

3. Purposive, functional and comparative interpretation confirms that Art. 2 of the Arbitration Rules of the Internet Domains Arbitration Court at the Polish Chamber of Information Technology and Telecommunications should be interpreted in such a way that the jurisdiction of the Arbitration Court includes examining of legal effects connected with the fact of registration, as well as the effects of registration occurring after the conclusion of the domain maintenance contract, with the proviso that the way in which the domain is used, not the mere fact of registration, usually allows for the assessment whether there has been such an infringement… .

4. The public policy clause covers both the procedural and substantive fundamental principles of the legal order. Procedural public policy may be a ground for assessing an arbitration award in two aspects. First, the procedure which led to rendering of an arbitration award is assessed for its compliance with the fundamental principles of the legal order, second, the effects of the arbitration award are assessed from the perspective of their consistency with the procedural public policy, i.e. whether they are reconcilable with the system of procedural law.

5. [A]rbitration awards after their recognition or enforcement enjoy also the substantive legal finality within the meaning of Art. 365 and 366 of the PCPC… .

6. Submission of a dispute existing between the parties to arbitration does not justify the conclusion that the parties have resigned from the right to reliable and insightful procedure ensuring the possibility of satisfaction of the legal interest of the parties that deserves to be protected.

Publication date: 12-12-2019 | Case no.: VII AGa 1503/18

Key issues: arbitration award, arbitration procedure, jurisdiction of arbitral tribunal

id: 20597

Kraków Court of Appeal judgment dated 12 December 2019 Case No. I ACa 917/18

1. The deformalized character of arbitration manifests itself both in the manner in which a hearing is conducted, as well as in more liberal procedural rules than before a state court. What is especially important, the speed of the arbitration procedure is increased not only by the manner in which proceedings before an arbitral tribunal are conducted, but also by the limitation of judicial review of arbitration awards.

2. The fact that not all arguments and evidence were deemed by the arbitral tribunal well-founded and sufficiently significant for the outcome of the case does not mean that a party has been deprived of the possibility to defend its rights or that the principle of equality of the parties has been violated. For these reasons, every instance in which an arbitral tribunal refuses to admit evidence sought by a party cannot be equated with that party being deprived of the right to a defence… . It should be emphasized that in arbitration proceedings, an arbitral tribunal has… the right to disregard evidence motions of the parties, if the tribunal finds they are not necessary to examine the case… .

3. Setting aside of an arbitration award is justified… only by such an offence to the substantive law that it would also bring the ruling into conflict with the overriding legal principles in force in the Republic of Poland. In other words, an arbitration award may be unlawful if it results in a ruling that violates the controlling principles of the rule of law… .

4. According to the well-established case law, state court review of arbitration awards does not include the verification of the accuracy of determination of the factual state. Different perception of state court jurisdiction would lead to contestation of the independence of arbitration, distorting not only the concepts underlying its functioning, but also the intention of the lawmaker, who has limited the scope of interference of state courts to exceptional circumstances, expressly indicated in the Act. 

Publication date: 12-12-2019 | Case no.: I ACa 917/18

Key issues: arbitration procedure, petition to set aside arbitration award

id: 20575

Warsaw Court of Appeal judgment dated 26 November 2019 Case No. I ACa 457/18

1. [P]rovisions in force at the time when an arbitration agreement was concluded decide on the validity and effectiveness thereof.

2. The provisions of the European Union law are a part of the Polish legal order, which is examined ex officio under Art. 1206 § 2 point 2 of the PCPC . The case law of the European Court of Justice/the Court of Justice of the European Union has determined unequivocally that the EU competition law regulations are a part of the legal order which must be taken into account by state courts in the course of their review of arbitration awards according to the principle of equivalence.

3. According to the established case-law of the European Court of Justice/the Court of Justice of the European Union, the principle of equivalence of the European Union law requires that if domestic procedural principles require a state court to grant the claim to set aside an arbitration award based on an allegation of violation of the domestic principles of the legal order, such a court is also obliged to grant the claim to set aside such an award, if it is based on an allegation of violation of the European Union principles of the same kind… .

4. [O]bligations imposed on the state court in connection with the application of Art. 108 (3) of the Treaty on the Functioning of the European Union shall also extend to arbitral tribunals.

Publication date: 26-11-2019 | Case no.: I ACa 457/18

Key issues: arbitrability of dispute, arbitration agreement, petition to set aside arbitration award

id: 20593

Warsaw Court of Appeal judgment dated 18 November 2019 Case No. VII AGa 804/19

1. [I]n the proceedings commenced as a result of a petition to set aside an arbitration award, a state court does not examine the arbitral tribunal’s assessment off the accuracy of evidence, the correctness of factual findings or interpretation and application of substantive law. The legitimacy of particular means by way of which an arbitral tribunal has resolved the disputed legal relationship is not subject to a state court’s assessment either. The essence of a petition to set aside an arbitration award is to create a control mechanism respecting, on the one hand, the separateness and autonomy of arbitration, and on the other hand, preventing non-state court rulings infringing the rule of law from functioning in the legal circulation. Proceedings concerning a petition to set aside an arbitration award do not result in reconsideration of the merits of the dispute between the parties, but are intended only to verify the petitioner’s allegations as to the existence of the grounds raised in the petition, as provided for in Art. 1206 § 1 of the PCPC. The aim of the petition is to prevent only an arbitration award which fails to comply with the elementary formal requirements of dispute resolution from remaining in the legal circulation.

2. The grounds resulting from Art. 1206 § 2 point 2 of the PCPC are legitimate, if the effect of an arbitration award is contrary to the fundamental principles of the legal order of the Republic of Poland. (…) The fundamental principles of the legal order which are the basis for assessment of an arbitration award shall be understood not only as constitutional rules, but also as ground rules in particular areas of law, and examination of a case with respect to the ground for setting aside of an award under Art. 1206 § 2 point 2 PCPC shall not go beyond a qualified infringement of law. The public policy clause covers both the procedural and substantive fundamental principles of the legal order. Procedural public policy may be a ground for assessing an arbitration award in two aspects. First, the procedure which led to issuance of an arbitration award is assessed for its compliance with the fundamental procedural principles of the legal order. Second, the effects of the arbitration award are assessed from the perspective of their consistency with the procedural public policy, i.e. whether they are reconcilable with the system of procedural law. Then, an infringement by an arbitral tribunal of the substantive law applicable to the resolution of the legal relationship from which the dispute referred to arbitration arose, legitimates setting aside of the award, only if it is connected with an infringement of the fundamental principles of the legal order. Simultaneously, in the event of a lack of compliance of an award with the fundamental principles of the legal order, the question is not whether the award is compliant with all absolutely binding provisions of law, but whether the award has had an effect which is irreconcilable with the fundamental principles of the state legal order (…). Indeed, the application of the public policy clause does not serve to remove all irregularities and defects of arbitration awards, but is intended to protect the integrity of the public policy.

3. The right to a fair trial is a pillar of a democratic state of law and for this reason its infringement justifies the conclusion that the rule of law has been infringed. (…) such a situation will occur especially in the event of non-consideration of a set-off allegation raised by a party. The principle of the fair trial dictates consideration of a set-off allegation properly raised by the respondent.

4. [T]he Arbitral Tribunal erroneously refused to hear the set-off allegation, because the mere fact of the respondent’s liability not being covered by the arbitration agreement is not an obstacle to consider such an allegation.

Publication date: 18-11-2019 | Case no.: VII AGa 804/19

Key issues: arbitration procedure, petition to set aside arbitration award

id: 20545

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